The Federal Solar Investment Tax Credit (ITC) Made Simple

What is it?

The solar Investment Tax Credit (ITC) is a federal tax credit for those who purchase solar energy systems for residential properties. The credit, which is applied to a home owner’s income tax, is equal to a percentage of the cost of eligible equipment. *

* (e.g. a $10K tax credit means you pay $10K less in taxes)

How much is it?

That depends on when you start construction (and when you start generating electricity). Starting in 2024, it will be equal to 30% of the cost of eligible solar equipment.

How do I qualify for the ITC? *

To qualify for the full federal solar ITC, you must meet the following requirements:

You must own the property. Renters are not eligible, though the property owner would be.

You must own your solar panels. If you lease them, you cannot directly claim the tax credit.

You must pay enough taxes to the federal government to qualify for the 30% tax credit. It’s a tax credit, not a rebate.

How do I receive my credit?

To receive your credit, you must complete IRS Form 5695 when you file your taxes and add your renewable energy credit information to your typical form 1040. Popular federal tax filing software include this credit as a default. If you use an accountant or tax processor, tell them that you purchased solar.

What is a tax credit?

A tax credit is not a tax rebate. While a rebate pays you back, a credit offsets the balance of tax due. So if you owe little to no federal taxes there is little to nothing to offset, and you won’t be able to take full advantage of the credit.

On the other hand, if you pay at least as much in taxes as you get for your tax credit, you can pay off your tax debt with the credit and/or get the remainder after withholding as a refund. Even better, if you don’t owe the full amount of your tax credit in the first year, you can roll the credit over to pay tax debt accrued in the following years (for as long as the ITC is in effect.)